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Bill is comparing the risk of two bonds. Both bonds were issued by Whole Giant Foods....

Bill is comparing the risk of two bonds. Both bonds were issued by Whole Giant Foods. The first bond has a 9% coupon and the second bond has a 7% coupon. Both bonds have 6 years remaining until maturity and a yield to maturity of 6%.. If market interest rates decrease by 2%, what is the percent price change for each of these bonds? Please show your work

Annual Coupon

Solutions

Expert Solution

Price is calculated using the PV function of Excel.

Percentage change in price is assessed as follows:

Bond 1:    9.9856%

Bond 2:   10.3025%

Details of calculation as follows:

jeff jeffy answered 2 days ago
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